Promoting Renewable Electricity Generation in Imperfect Markets: Price vs. Quantity Policies
FCN Working Paper No. 1/2008
42 Pages Posted: 4 Jun 2010 Last revised: 10 Nov 2012
Date Written: July 1, 2008
The search for economically efficient policy instruments designed to promote the diffusion of renewable energy technologies in liberalized markets has led to the introduction of quota-based tradable 'green' certificate (TGC) schemes for renewable electricity. However, there is a debate about the pros and cons of TGC, a quantity control policy, compared to guaranteed feed-in tariffs, a price control policy. In this paper we contrast these two alternatives in terms of social welfare, taking into account that electricity markets are not perfectly competitive, and show that the price control policy dominates the quantity control policy in terms of social welfare.
Keywords: Green Certificates, Renewable Portfolio Standard, Feed-in Tariff
JEL Classification: Q42, Q48
Suggested Citation: Suggested Citation